Attendance Management Human Rights Versus Lean Operations - Lessons Learned from Keays v. Honda Canada Inc.

By P.A. Neena Gupta at Gowling Lafleur Henderson LLP for HRinfodesk---Canadian Payroll and Employment Law, May 2005

Attendance management is a perennial problem for human resource managers. The problem is compounded when the employee purports to have a medical condition that is poorly understood, hard to prove (or disprove) and is intermittently absent. Honda Canada Inc. made some terrible mistakes in the case of one of its employees, Kevin Keays. A trial judge awarded the employee two years notice and $500,000 in punitive damages.

Kevin Keays had started on the production line in 1986 and was promoted to the Quality Engineering Department 20 months later. Between October 1996 to December 1998, Mr. Keays was on short-term and then long-term disability. He was diagnosed with Chronic Fatigue Syndrome in 1997.

The insurer, London Life, determined that there "was no objective evidence of total disability" and that Mr. Keays should be able to return to work on a graduated and then full-time basis. Although Justice McIsaac of the Ontario Superior Court found that London Life erred in cutting off benefits, London Life was not sued.

Mr. Keays returned to work in early 1999 under protest. His absenteeism increased. He was unable to meet the attendance requirements of Honda. Justice McIsaac observed:

Despite receiving glowing reports for most of his work categories, he was continually receiving negative assessments in relation to his attendance. Understandably, his absences impacted on the smooth operation of this department and, as a consequence, the smooth operation of the entire plant. Because there was no "slack" in the lean operation mandated by the defendant [Honda], the plaintiff's responsibilities feel to be undertaken by his already busy co-workers in the department. This grim history of absences is well documented in the record before me along with the negative assessments which were recorded by his superiors.

In 1999, Mr. Keays sought protection under a special program that exempted associates entitled to accommodation under the Ontario Human Rights Code (OHRC) from the strict enforcement of the attendance management policies. The exemption, ironically, caused problems for Mr. Keays, as it required each absence to be validated by a doctor and each appointment only increased his absenteeism.

Honda faced a difficult problem when Mr. Keays returned to work. His record of absenteeism had a clearly deleterious effect on plant operations. London Life had determined that Mr. Keays did not qualify for LTD benefits. Honda received advice from its occupational health specialists that Mr. Keays could improve on his absenteeism record. There is a strong suggestion that Honda and its consultant doctors believed that Mr. Keays' own physician was inclined to certify absences too easily.

Matters deteriorated rapidly when Mr. Keays sought legal advice. Honda had an unwritten policy discouraging the participation of any third-party advocates (unions or lawyers) on behalf of its associates (employees). Justice McIsaac observed, "...the theory is that, because all employees are part of Honda, they do not need anyone to represent their interests. Their interests are Honda's interests and all issues will be resolved "in-house". Based on this theory, Honda has been able to resist any attempt at unionization."

After consultation with its consultant physicians, Honda cancelled the OHRC accommodation for Mr. Keays, and ordered him to attend an assessment by Dr. Brennan. Mr. Keays did not trust Dr. Brennan and refused to attend, until further clarification was provided regarding the ambit of Dr. Brennan's retainer.

On March 29, 2000, Mr. Keays was terminated formally on the basis of "just cause", i.e., Mr. Keays' refusal to meet with Dr. Brennan. Interestingly, it appears that Honda did not plead that the contract of employment was frustrated by Mr. Keays' protracted absenteeism. Justice McIsaac found that Mr. Keays had a lawful excuse to refuse to meet Dr. Brennan as the request was not made by Honda in "good faith for legitimate purposes, but was made as a prelude to terminating Mr. Keays' employment at Honda." It was, to use the trial judge's own words, a "set-up". This led to the inevitable wrongful dismissal claim. Justice McIsaac awarded Mr. Keays the following:

1. 15 months' pay in lieu of notice as reasonable notice of termination. While high, this is not an unusual award for an employee with 13 ¼ years of service. (November 13, 1986 to March 28, 2000) in a responsible role.

2. 9 additional months' pay in lieu of notice as "Wallace" damages to reflect the Honda's bad faith in the way it dealt with the termination (and the events leading up to that decision). This is a significant award of additional "Wallace" damages and represents the high-end of Wallace damages in the past 3 years.

3. $500,000 in punitive damages for Honda's breach of Mr. Keays' rights under the OHRC. Justice McIsaac was not impressed with the argument that punitives should be limtied to the $10,000 statutory cap under section 41(1)(b) for mental anguish. This is an unprecedented punitive damage award in Canadian employment law and one of the highest punitive damage awards assessed by a judge in Ontario legal history.

Justice McIsaac openly criticised Honda's "self-imposed mandate to run "lean" operation." He characterized Honda as a worldwide "Leviathan" and Mr. Keays as a "minnow". Nonetheless, one wonders about the alternatives that Honda had, given the level of Mr. Keays' absenteeism. Should it have another person in the department to ensure that there was some slack and the operation could have kept running despite Mr. Keays' inevitable absences? Should co-workers have been forced to work additional hours? Should Honda simply accepted plant-wide inefficiencies? In the highly-competitive world of automotive production, is it inappropriate to operate a lean operation and require employees to work as scheduled within reason?

The decision is under appeal. Nonetheless, the case serves as a stark reminder of the risk an employer runs if it chooses to terminate an employee for repeated absenteeism that relates to a medical condition that is poorly understood and difficult to verify by objective criteria.

Employers who are managing an employee with an absenteeism problem related to health issues should tread carefully and may wish to consider:

1. Supporting the employee's claim to long-term disability, if it believes that the insurer has been overly aggressive in denying benefits. In many cases, an employer's testimony regarding why the employee's condition is incompatible with working with the employer full-time can be very persuasive. Explore the possibility of returning the employee on a "rehabilitation basis", so that the cost of the employee is partially offset by the LTD benefits.

2. Ensure that medical information is not over-stated or misrepresented. In the Honda case, Honda quoted selectively from its own occupational health specialists in correspondence to Mr. Keays. This was used as powerful evidence of bad faith.

3. Refrain from assuming that the employee is malingering, unless there is objective evidence to the contrary. As Justice McIsaac observed in the case of CFS, the medical establishes shows that a small minority of patients do not improve. Just because an employee seems to have an unusually severe case of a particular condition does not mean that it isn't within medical parameters. If an employer believes an employee is abusing the system, invest in surveillance. Honda had no evidence, besides its own suspicions, that Mr. Keays was malingering.

4. Document efforts to accommodate employees and the reasons why certain options are no longer feasible. The trial judge's decision implies that the decision to retract the OHRC accommodation seemed to have been a deliberate effort to pressure Mr. Keays, rather than driven by legitimate operational concerns.

5. Work with the employee's physicians. Honda was unable to elicit the support and trust of Mr. Keays' physician. Consequently, it is not surprising that Mr. Keays' doctor became very protective of his patient.

6. Consult with lawyers regarding when a contract of employment might be considered frustrated. Mr. Keays was absent from employment for over two years and Honda may have had an opportunity to consider whether the contract of employment had been frustrated due to his lengthy absence. The doctrine of frustration is in considerable flux, largely because of the conflicting doctrinal pressures of the law of contract and human rights law. Nonetheless, a clear-cut policy with respect to frustration of contract may have assisted Honda in preventing the problems it had in managing Mr. Keays upon his forced return to the plant.

This trial judge made numerous adverse findings against Honda, its in-house counsel, the occupational health specialists and the insurer. The decision and the press coverage it received has also dented Honda's well-earned reputation for enlightened employment practices.

(March 17, 2005, Ontario Superior Court of Justce, Mr. Justice John MacIsaac, full-text of decision available at www.canlii.org/on/cas/onsc/2005/2005onsc13349.html)

P.A. Neena Gupta, Partner, Gowling Lafleur Henderson LLP. For further information, please contact P.A. Neena Gupta at neena.gupta@gowlings.com.

Neena is a partner of the firm's National Employment and Labour Law Practice Group of Gowling Lafleur Henderson LLP and has 15 years of experience in advising employers on the legal aspects of change management. This article is based on a lengthy paper prepared by Cristie M. Sutherland, an associate with the firm, which is available on request.

Written for and published on HRinfodesk---Canadian Payroll and Employment Law

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